By David Lawson
Yesterday’s talk by RBA Governor Glenn Stevens at the Anika Foundation Luncheon, The Lucky Country, has been well spread across the press today. While Glenn Stevens has an undeniable obligation to uphold confidence in the financial system as part of the overall economy, credit to him for acknowledging the sceptics when he said:
The so-called ‘market
monetarists’ – that is, a growing pack of neoclassical economists who are advocating that central banks should try to generate inflation – are not as strange a breed as many think. Recently we compared classic deflationary monetarism with contemporary QE policies and found that they were based on the same underlying theoretical framework. We also found that the high priest of classical monetarism himself, Milton Friedman, strongly advocated inflationary monetary policies for both Japan after 1991 and the US after the stock market crash of 1929. So, it is by no means surprising that when one monetarist policy fails (I refer to QE), another will quickly be cooked up by Friedman devotees.
Peter Switzer interviewed me last night on his Sky News program. We discuss the Euro, why default is preferable to rescheduling, fiscal austerity versus deficit funding, Nobel Prize Winner Prescott saying that the Great Depression was an extended holiday, Australian property, what is a house price crash (comparing Japan and the USA to Australia), how does Australia’s housing market really differ from the USA’s, what really makes house prices rise, stock market performance in the next decade, the Credit Accelerator and the ups and downs of a down-trending market, the pain in Spain, and what it might lead to.
During the Great Depression and the war years monetary policy in Britain had proved largely ineffective. In the meantime it was shown that government spending could cure economic depressions and return the economy to full or even super-full employment. After the war most political parties in Britain were thus interested in using fiscal policy to generate full employment rather than rely on the vagaries of monetary policy. (This, it should be said, is the polar opposite of our rather more desperate situation today).
URPE–The Union for Radical Political Economics–is holding a Summer School for the Occupy movement, and as part of that invited papers that explained the crisis in 1000 words or less (so that they can be printed on one double-sided sheet). Here’s my effort in somewhat less than 1,000 words (though with 2 figures). In the interests of URPE’s objective in this exercise, here’s the PDF of this blog post for general download.
By Philip Pilkington, a writer and journalist based in Dublin, Ireland. You can follow him on Twitter at @pilkingtonphil
In the first part of this piece we looked at the Thatcher government’s monetarist experiment in the early 1980s. It did not end well. So we must ask: did the Thatcher government and the monetarists believe in what they were doing or were they cynically using monetarist policy as a device to destroy large parts of British industry in order to destroy the trade union movement?
While there are pretty stark dissimilarities between the current quantitative easing (QE) policies of many governments and the old monetarism that prevailed in the late-70s and early-80s, the reason that these both policies were ineffective is because they were based on the same flawed ideas. The key difference between the two is that where monetarism was implemented as a deflationary and contractionary policy, QE is currently being implemented as an inflationary and expansionary policy. As a result, examining the failure of monetarist policies thirty years ago provides important lessons considering QE and its offshoots.
By Philip Soos
One of the more interesting outcomes the 2011 Census produced was the figures concerning the housing market. The reason for this interest is how the results contrasted with the idea that Australia currently suffers from an acute housing undersupply or shortage. Taking the lead in promoting this idea is the National Housing Supply Council (NHSC), an organisation formed by the federal government in May 2008 to provide an in-depth analysis of the housing market. The NHSC is widely considered to be the peak body in this field.
I’ve just taken time-out from the pre-conference social event at the Central Bank of Turkey annual conference, and (as enjoyable as that function was) it’s lucky that I did: Mish Shedlock has followed up on some criticisms of my “Modern Debt Jubilee” proposal with a post on real solutions for the debt crisis. I will try to reply to Mish’s follow-up before I turn in for the night here in Cappadocia.
Below is a video from the 2011 International Conference Vision, Action and Leadership, hosted by Aaron Wissner. The conference used the Delphi method was used to draw upon some commonalities and differences around the interpretation of the current financial crisis from panel members, including Tom Greco, Steve Keen and Nichole Foss. This finishing group interview shares an interesting perspective on the outcomes of this conferencing technique.
